Exercise 12-11 Fred Moss, owner of Moss Interiors, is negotiating for the purcha
ID: 2519108 • Letter: E
Question
Exercise 12-11
Fred Moss, owner of Moss Interiors, is negotiating for the purchase of Zweifel Galleries. The balance sheet of Zweifel is given in an abbreviated form below.
ZWEIFEL GALLERIES
BALANCE SHEET
AS OF DECEMBER 31, 2017
Assets
Liabilities and Stockholders’ Equity
$100,000
$50,000
70,000
300,000
200,000
350,000
175,000
$200,000
30,000
25,000
225,000
$575,000
$575,000
Moss and Zweifel agree that:
Zweifel agrees to sell the gallery to Moss for $350,000.
Prepare the entry to record the purchase of Zweifel Galleries on Moss’s books. (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts.)
Account Titles and Explanation
Debit
Credit
ZWEIFEL GALLERIES
BALANCE SHEET
AS OF DECEMBER 31, 2017
Assets
Liabilities and Stockholders’ Equity
Cash$100,000
Accounts payable$50,000
Land70,000
Notes payable (long-term)300,000
Buildings (net)200,000
Total liabilities350,000
Equipment (net)175,000
Common stock$200,000
Copyrights (net)30,000
Retained earnings25,000
225,000
Total assets$575,000
Total liabilities and stockholders’ equity$575,000
Explanation / Answer
fair value of assets $ $ cash 100000 land (70000+30000) 100000 to bring to fair value buildings 200000 intangibles (copyrights) 30000 equipment (175000-5000) 170000 to bring to fair value total 600000 A fair value of liabilities 350000 B Balance sheet fair value [A-B] 250000 C Given value of Assets -Liabilites 225000 D (575000-350000) Balance sheet adjustment to fair value = C-D 25000 Purchase Price Of moss 350000 E Goodwill = E-C 100000 Account titles and explanation Debit Credit Investment in Zweifel Galleries 350000 cash 350000 Common Stock 200000 Retained Earnings 25000 Balance sheet adjustment to fair value 25000 Goodwill 100000 Investment in Zweifel Galleries 350000
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